A surge in hydro power and further inroads from other renewable energy sources is contributing to a drop in carbon emissions from the electricity sector, according to Pitt & Sherry research.

Annualised output from Hydro Tasmania is now at its highest since Tasmania joined the National Electricity Market (NEM) in 2005, while output from the Snowy system is at its highest since 2006, said Hugh Saddler, principal consultant with the Pitt & Sherry consultancy.

Hydro Tasmania “is pretty well at its limit”, Dr Saddler said, adding that the carbon tax had “certainly made hydro look attractive”.

On an annualised basis, carbon emissions from the NEM - which serves the eastern states and South Australia - are down about 4.2 per cent since the introduction of the carbon price last July.

Advertisement

“The steady fall in demand coupled with the carbon price is undermining the economics of the coal-fired generators,” Dr Saddler said.

Demand for electricity has slumped in NSW and Victoria as both states see a drop in industrial activity, while the rapid take-up of solar photovoltaic panels is also eroding the NEM's customer base. Solar PV power generation is about 1-1.5 per cent.

“We are in an oversupply situation,” Mike Sandiford, director of the Melbourne Energy Institute, said. “Even with this relatively warm summer, demand has not increased significantly.”

In the year to January, wind and hydro energy sources accounted for 12.1 per cent of the NEM generation, with hydro making up 8.4 percentage points of that contribution. Hydro's share has risen from 6.4 per cent of the NEM total since February 2012, in part because of good inflows into dams, Dr Saddler said.

Output from coal-fired power plants has continued to slide.

Floods affected Energy Australia's Yallourn plant in the middle of last year and the company has since opted to shut one of its four units from November to mid-January, Dr Saddler said.

In January, NSW's Wallerawang C power plant announced it would mothball one of its two 500-megawatt units for at least 12 months, starting at the end of last month.